15. Consolidated statement of cash flows Flashcards
What are the two methods to prepare cassh flow
Direct method: shows reciepts from customers, cash payments to suppliers
Indirect Method: starts with profit before tax and adjusts for non cash items
What is the format of the cash from operating activities
Cash from operating activities:
Profit before tax
Adjust for:
Profit on sale (-)
Share of profit of associate/joint venture (-)
Foreign exchange loss +
Investment income (-)
Interest expense +
Descrease in inventories +
Increase in trade and recieavables (-)
Decrease in payables (-)
= Cash generated from operation
(Less interest paid)
Less Income taxes paid
What is the format of hte soCF
Cash from operating activities
Cash from investing activities
Cash from financing acitivities
What is the format of the cash from investing activities
Acquisition of Subsidiary X (-)
PPE purchased (-)
Proceeds from sale +
Interest recieved +
Dividends recieved +
What is the format for investing activites
Proceeds from issue of share capital
Proceeds from long term borrowings
Less payments of lease liabilities
Less dividends paid to NCI and owners
Define Cash and Csah equivilents
Cash: cash on hand and demand deposits
Cash equivilent: short term, highly liquid investments that are readily convertible and low risk of changes to amount
What is meant by operating activities
Principal revenue producing acitviites of the entity and other activiities that are not investing or financingW
What are investing activities
The acquisition and disposal of long term assets and other investments
What is meant by financing activities
The activities that result in chages in the size and composition of the contributed equity and borrowings of entity
What is recognised in the cash flow regarding NCI
Outflow for Dividends paid to non controlling interest
Either presented in Financing or Operating Activities
What is the calculation for dividends paid to NCI
Opening balance
NCI Share of Total Comp Income
NCI at fair value
( Dividends paid to NCI)
= Closing balance
What is recognised regarding associates or joint ventures in SOCF
Cash Inflow of dividends recieved from Associates/Joint ventures
Either under investing activities or operating activities
What is the calculation for dividends recievd from associattes/joint ventures
Opening balance
Group share of profit for year
Group share other comp income
Any new Acquisitions in year
Less Dividends Recieved
= Closing balance
What is another additional cash flow regarding associates and joint ventures
Cash paid to acquire shares in associates
What two cash flows arise when a subsidiary is acquired
Cash paid to buy shares
Cash or overdraft balance of subsidiary
These should be netted off and reported in investment activities
How do you calculate the cash flow to record on acquisition of a subsidiary
Cash paid to buy shares (X)
Add subsidiary’s cash or less subsidiary’s overdraft
How do you calculate the increase/decrease adjustments to operating activities due to subsidiary
Opening balance
Aquisition of subsidiary
Increase x OR dECREASE (x)
= cLOSING BALANCE
What impact does goodwill have on consolidated statement of cash flow
Under indirect method, impairment of goodwill must be added back to profit before tax
How do you calculate the dividend paid to owners of parent in SOCF
Consolidated RE bought down
Profit for the year to owners
(Dividends Paid to owners)
= Consolidated RE carried forward
How do you calculate NCI Dividends
Opening Balance
NCI Share of Total Comp income
Acquisition of Subsidiary NCI
(Dividends paid to NCI)
= Closing balance
What is the correct treatment for the group share of the associate’s profit in the consolidated statement of cash flows prepared under the indirect method?
Deduct from profit before tax
as it is a non cash item which needs to be adjusted for
What is the correct treatment of dividends paid to non-controlling interests in a group statement of cash flows?
Include under the heading ‘operating activities’ or ‘financing activities’
